Category: Taxes

The U.S. Census Bureau has published new estimates of health spending based on their somewhat obscure but important Quarterly Services Survey. Analysis of the survey data shows that health spending was 7.3% higher in the first quarter of 2015 than in the first quarter of last year. Hospital spending increased 9.2%.

By May 15, insurers had to file 2016 premiums with their state regulatory agencies and provide an explanation for rate increases exceeding 10 percent. On June 1, the Department of Health and Human Services released this information for 41 states plus the District of Columbia. Based on these filings, it appears that premiums for many Obamacare plans, particularly those with large market share, will rise substantially next year. In these states insurers requested double-digit increases for 676 individual and small group plans. These are on top of individual-market premium increases averaging 49 percent between 2013 and 2014.

According to the Centers for Medicare and Medicaid Services, these states include 7.9 million total exchange enrollees – nearly four out of every five people enrolled in exchange plans across the country. The double-digit rate increases HHS reported affect more than six million people in these states. These increases apply for Obamacare plans sold on exchanges as well as Obamacare plans sold off the exchanges. The weighted average premium increase for these six million people is 21 percent. Because the HHS list does not include insurers requesting double-digit rate hikes in large states such as California and New York, final numbers will be even higher.

Obamacare plans have disproportionately attracted older and sicker people. In their rate request filings, insurance companies generally said that claims have been far above what they expected. Moreover, Obamacare contained a large subsidy for insurers through the law’s reinsurance program – equaling $20 billion over three years. The reinsurance program is rapidly phasing out. The combination of these factors means premiums may continue to spiral upward as healthier people choose not to buy the mandate-laden, high-deductible, and expensive coverage.

Relying on any system to continue requires that such a system is sustainable. If it is not,
then, as the late economist Herb Stein has said, “it will stop.” In stopping, however, such a
system will impact those who rely on it and assume that it will continue.

House lawmakers are gearing up to take fresh aim at the Affordable Care Act’s tax on medical devices.

The House Ways and Means Committee will consider a bill Tuesday to repeal the 2.3% excise tax on sales of devices including pacemakers and stents. The bill is sponsored by Rep. Erik Paulsen, a Minnesota Republican. Read about Paulsen’s bill.

A repeal of the tax has passed the House three times previously, according to Paulsen’s office: once as a stand-alone bill and twice as part of other bills. The Senate passed a nonbinding repeal of the tax in 2013.

The tax raises money for President Barack Obama’s signature health-care law. Repeal would reduce revenues by $26.5 billion from next year through 2025, according to the congressional Joint Committee on Taxation. Paulsen’s bill doesn’t include a way to make up the lost revenue.

The cost of Obamacare could rise for millions of Americans next year, with one insurer proposing a 50 percent hike in premiums, fueling the controversy about just how “affordable” the Affordable Care Act really is.

Even as federal regulators take steps to constrain administrative spending by private health insurers, government overhead on health coverage has soared.

In a Health Affairs blogpost published Wednesday, David Himmelstein and Steffie Woolhandler use actuarial estimates from the Centers for Medicare and Medicaid Services to project that between 2014 and 2022, national spending on private insurance overhead and government administration will rise by $273.6 billion related to the health-care overhaul.

The authors both favor single-payer health insurance; Mr. Himmelstein co-founded Physicians for a National Health Program, an advocacy organization directed to that end. They close their piece by saying that “In health care, public insurance gives much more bang for each buck.”

Yet overhead in the public sector is growing much faster than in the private sector.

The High Cost Plan Excise Tax, or “Cadillac Tax,” is one of the key provisions of Obamacare, both from the perspective of raising revenue and health policy. Beginning in 2018, there will be a tax of 40 percent on the amount of employer-provided insurance that exceeds a threshold. The threshold is set at $10,200 for individuals and $27,500 for family coverage in 2018, but is adjusted upward each year based on the Consumer Product Index (CPI). The Cadillac tax has been politically contentious from the outset and is garnering increasing attention, in part because some employers are already exceeding the threshold and are contemplating life with the tax.

Five years after the passage of ObamaCare, there is one expense that’s still causing sticker shock across the healthcare industry: overhead costs.

The administrative costs for healthcare plans are expected to explode by more than a quarter of a trillion dollars over the next decade, according to a new study published by the Health Affairs blog.

The $270 billion in new costs, for both private insurance companies and government programs, will be “over and above what would have been expected had the law not been enacted,” one of the authors, David Himmelstein, wrote Wednesday.

Those costs will be particularly high this year, when overhead is expected to make up 45 percent of all federal spending related to the Affordable Care Act. By 2022, that ratio will decrease to about 20 percent of federal spending related to the law.

So the proposed 2016 Obamacare rates have been filed in many states, and in many states, the numbers are eye-popping. Market leaders are requesting double-digit increases in a lot of places. Some of the biggest are really double-digit: 51 percent in New Mexico, 36 percent in Tennessee, 30 percent in Maryland, 25 percent in Oregon. The reason? They say that with a full year of claims data under their belt for the first time since Obamacare went into effect, they’re finding the insurance pool was considerably older and sicker than expected.

Don’t panic, says Kevin Drum. This is just the opening bid in a regulatory dance that will end up somewhere very different: “A few months from now, the real rate increases — the ones approved by state and federal authorities — will begin to trickle out. They’ll mostly be in single digits, with a few in the low teens. The average for the entire country will end up being something like 4-8 percent.”